By By Uditha Jayasinghe
COLOMBO (Reuters) -The Maldives has “phased out” a brief engagement with U.S. firm Centerview Partners on debt matters and the island nation will now focus on managing debt bilaterally, its deputy finance minister told Reuters.
Dwindling foreign currency reserves had sparked fears that the Maldives could become the first country to default on Islamic sovereign debt, as it has a $500-million sukuk maturing in 2026.
Hassan Miras said the government had engaged Centerview to analyse its debt portfolio, but was now focused on managing debt repayments bilaterally, or through direct talks with key Indian and Chinese counterparts.
“There have been positive responses from our bilateral partners recently, with China giving a green light on refinancing past debt,” the minister added.
The Maldives has also been holding talks with multilateral partners to secure additional funding, he said, with “appropriate fiscal adjustments” to help it manage debt set to feature in the budget, due to be unveiled in November.
Speaking about Centerview, he said, “The focus was on formulating a funding strategy and the Maldives government engaged them for a period of time and then phased out their services.”
Centerview Partners did not immediately comment on the decision.
The World Bank says the Maldives’ total public and publicly guaranteed debt stood at $8.2 billion, equivalent to 116% of its GDP, in the first quarter of this year.
About half of that is external debt, with a big chunk owed to regional rivals China and India, which have extended loans of $1.37 billion and $124 million, the Bank’s data shows.
Both countries have shored up support to the Maldives in recent weeks, easing investor concerns about a debt crisis and helping to bolster its international bonds.
Beijing signed a financial co-operation pact with the Maldives in September to strengthen trade and investment.
Last month, India subscribed to a $50-million Maldives Treasury bill and said this month it had approved currency swap deals running into more than $750 million.
“Without radical policy measures, pressures are likely to persist over the medium term,” Fitch Ratings said this week in a note, however.
“The swaps will have to be repaid and do not resolve the underlying issues of high and rising public debt, in combination with low foreign reserves and a hard peg to the U.S. dollar.”